Commercial Real Estate Market Outlook
Total commercial property transaction volume for the first two months of 2015 was $88 billion, up 38% from the same period in 2014 according to Real Capital Analytics (“RCA”). The increase was driven in part by several large portfolio transactions in the retail and industrial sectors.
According to CBRE Econometric Advisors (“CBRE-EA”), vacancy rates for all four commercial property sectors remained constant or showed improvement during the first quarter:
Multifamily – At the end of the first quarter of 2015, the national vacancy rate for multifamily properties was 5.2%, down 40 bps from one year ago. 49 out of the 63 markets tracked by CBRE-EA have lower vacancy rates than in the quarter prior. Eight markets – Portland, Minneapolis, New York, Newark, San Jose, San Francisco, Miami and Oakland – have vacancy rates less than 4%.
Retail – The national retail vacancy rate remained constant at 11.5% in the first quarter of 2015. The vacancy rate is down 50 bps from the first quarter of 2014 and 180 bps from the post-recession high of 13.3%. CBRE-EA tracked increased year-over-year retail sales in December 2014 and January 2015 as well.
Office – As of March 31, 2015, the national office vacancy level was 13.9%, down 10 bps from the fourth quarter 2014. Overall, the vacancy rate has declined 100 bps over the past four quarters. In 2015, CBRE-EA expects the vacancy rate to continue to decrease toward the pre-recession low of 12.4%.
Industrial – The national industrial vacancy level fell 20 basis points in the first quarter of 2015, to 10.1%. The industrial sector has now posted 19 straight quarters of vacancy decreases, totaling 440 bps, the longest period of continued decline that CBRE-EA has ever recorded. The industrial recovery continues to be broad based, with 41 out of 57 markets tracked by CBRE-EA recording vacancy decreases in the first quarter.